Mumbai: Indian steel players have reacted to the hike in excise duty in the Union Budget from 8% to 10% by increasing the prices of both their long and flat products from March 1. Those that have raised their prices include public sector Sail, besides JSW Steel, Essar Steel and Ispat Industries. The impact of the higher excise duty translates to a Rs 500-600 a tonne increase for consumers.
Before the price hike, long product prices in the domestic market ranged between Rs 27,000 and Rs 29,000 a tonne. Long products are used mainly in the construction industry. The price of flat products, used primarily in the automobile sector, stood at Rs 34,000-36,000 a tonne.
Declining to give specific details, a Sail spokesperson told FE: “The hike in excise duty has been passed on to consumers. Earlier, when the excise duty was reduced by the government, that benefit was also passed on.” The government brought down excise duties from 10% to 8% in February last year as part of its measures to boost the economy following the global meltdown.
Sail chairman SK Roongta has reportedly said that with a 2% increase in excise duties, steel prices might go up by Rs 600 a tonne. Added to this will be higher transportation costs on account of the fuel price hike.
According to Ispat Industries Ltd director (finance) Anil Surekha, “Apart from an increase in excise duty, the cost push is also responsible for the steel price hike.” Iron ore prices in the last 15 days rose by 7% to around $142 a tonne for export to China. Coking coal contracts, which are being negotiated, could be 20-25% higher than last year’s prices. Iron ore contract prices for FY09 were sealed at $75 a tonne, and those for coking coal at $300 a tonne. In FY10, long-term coking coal prices reduced to $128 a tonne.
JSW Steel Ltd has raised the price of all products by 2%. Seshagiri Rao, joint MD of JSW Steel and Group CFO, had earlier said, “Partial withdrawal of stimulus packages by way of a hike in excise duty, restoration of custom duty and excise duty on petroleum products is inflationary.”
An Essar Steel spokesperson too said, “We will levy the duty as per the revised notification.” Tata Steel has not yet taken a decision on passing the excise duty on to its consumers, a spokesperson said.
Despite the steel ministry’s concerns and.suggestions to control rising steel prices, producers had in February raised them by Rs 500 a tonne because of rising costs and an uptrend in international prices. Before that, steel players had in December and January also increased prices of their products by 3-5% on the back of good demand and firming international prices. One industry source said, “Steel sector Ebitda per tonne could come under pressure during April-June once higher input prices kick in, as there is still a considerable level of over-supply in the western world.” The recent Care Ratings report noted that the increase in excise duty is expected to be negative for steel manufacturers; the overall impact is likely to depend upon their ability to pass this on to customers.
Source : Financial Express